Fitch: Baku-Tbilisi-Kars railway to further increase importance of Azerbaijan Railways

Report informs, Fitch Ratings says in a report, slowing economies and FX volatility may put pressure on the financial profile of rail transport companies in the former Soviet Union (FSU) countries.

“Freight rail transportation volumes continued to decline in most FSU countries over 5M15 and we expect rail volumes to remain weak in 2H15 on the back of lower GDP growth across the region,” report declares.

FSU rail transport companies that are reliant on crude oil transportation are also under competitive pressure as crude oil traffic continues to switch to pipelines from rail.

Rated rail transport companies are subject to FX fluctuations, albeit to varying degree. A sustained weakening of local currencies could undermine companies’ credit metrics. Flat tariff growth in Kazakhstan will put further pressure on JSC National Company Kazakhstan Temir Zholy’s standalone profile.

“Positively, the expected commissioning of Baku-Tbilisi-Kars railway line will further increase importance of Azerbaijan Railways CJSC and Georgian Railway JSC in freight transportation within the region and will enhance their business profiles,” Fitch believes.

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